Forty-five percent of an organization’s customer payments are submitted online. Eight percent of online payments are rejected. Executive management decides to outsource its online payment services to a contractor that will assume 75 percent of the total value of rejected payments. The organization estimates $1.25 million customer payments due during the contract period.
Which of the following represents the organization’s residual risk for online customer payments due?
A. $11, 250
B. $25, 000
C. $33, 750
D. $45, 000
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